David Tepper Talks and the Market Rallies
“I’m definitely bullish,” so said the ultra-compensated ($2.2 billion in 2012) hedge fund manager David Tepper of Appaloosa Management, who has a knack for moving markets. Tepper was speaking to CNBC’s Joe Kernen and Andrew Ross Sorkin and gave his typically upbeat appraisal of the stock market and economy.
Comparing the case for a positive market with the trial in “My Cousin Vinny” where the evidence was so overwhelming the judge proclaimed, “case dismissed,” Tepper made the case for a continued stock market rally.
“The economy is getting better, autos are better, housing is better, they can’t find enough people to work in housing is the only thing holding it back right now…Australia just eased, the ECB just eased, Korea just eased, Japan is in massive easing mode, and these United States of America we are just amazed at the way these numbers work as we go out further,” Tepper gushed.
Tepper proceeded to discuss the tapering moves by the Fed. Tepper said the numbers are truly amazing. “The Fed is going to purchase $85 billion of treasuries and mortgages a month,” Tepper said and added, “If you look at the numbers over the next six months because of tax increases, because of budget cuts, because of growth in the economy, and also because of Fannie Mae and Freddie Mac paying back money to the government, the deficit over the next six months is shrinking massively.”
The deficit will be well under $100 billion, probably closer to $85 billion over the next six months, and with the Fed buying $500 billion, you have $400 billion that has to be made up, Tepper stated. That $400 billion is being taken out of the market, the bond market, and is now in everyone’s hands, according to Tepper. That money either has to go in the economy, it has to make the short and long ends of the curve trade better, or it has to make stocks trade higher, Tepper added.
Tepper said if we don’t taper back we’ll get into “this hyper drive market.” “These numbers are so tremendous you have the market in sort of a hyper mode potentially,” Tepper explained.
Tepper said, “I don’t know where the money goes, and you know who else doesn’t know where the money goes…the Federal Reserve of the United States of America.”
The interview continued with Tepper further discussing why the Fed needs to taper for a smooth market move, why if there is not a true taper the market will end up like the last half of 1999, the state of the equity risk premium, what future moves could come from the ECB, why all stock markets are the place to be, and why he and Dan Loeb are particularly bullish on Japan.
Back in January, Tepper said the U. S. was on the verge of an “explosion of greatness [link].”